Analysis by an industry leader has examined how the type of borrower affects the likelihood of a mortgage default

Demand for fixed rate home loans has peaked, according to ASX-listed aggregator AFG, with this product accounting for almost one in five loans.

Fixed rate home loans peaked at 17.7% of AFG’s total volume for the first quarter of the 2016 calendar year. By comparison, the percentage of those fixing their rates in the first quarter of the 2016 financial year was as low as 11.4%.

According to AFG’s general manager sales and operations, Mark Hewitt, consumers are wary of out-of-cycle rate hikes by the banks.

“With sections of the money market making the call of a rate cut in the coming months there are some very attractive fixed rates available. With rates being at historical lows the downside risk of fixing is relatively small so many borrowers are choosing to lock in now.

“Despite this month’s decision by the Reserve Bank of Australia to leave the cash rate on hold at a record low 2% there are also no guarantees lenders won’t make their own moves outside the RBA cycle. Some are talking about increased funding and regulatory costs and locking the low rates in now is a way borrowers can insulate themselves against any out of cycle increases by the banks.”

The March quarter has also seen investor numbers on the rise again. Investor loans increased from 31% of AFG’s total volume to 33%.

Hewitt says this is because lenders are now returning to the investor market having fallen below the growth cap set by the regulator last year.

AFG’s overall volume was up 5.7% on the same quarter in 2015, with VIC leading the states with an increase of 15.7%, followed by SA up 11.3%, NSW up 10.5% and QLD recording a rise of 7.6%.

The resources downturn has hit WA activity with that state recording a drop of 16.7% and NT dropping by 28% on the same time last year.

“In a positive message for the health of the lending market, the average LVR of 68% is the lowest it has been for three years,” said Hewitt.

“This means homebuyers are continuing to borrow within their capabilities.”